AN OVERVIEW OF THE
FINANCE ACT 2023
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INTRODUCTION
The Finance Act 2023 (the “FA 2023”) was signed into law by former President Muhammadu
Buhari on 28 May 2023, prior to his leaving office. The FA 2023 takes effect from 28 May
2023, and it replaces the Finance Bill 2022 (“FB 2022”), which had been circulated widely
within the public domain. The Finance Act 2023 introduces some sweeping changes, such as
the withdrawal of incentives, the introduction of a loss relief regime for the disposal of
assets, and the inclusion of digital assets as chargeable assets for capital gains tax purposes,
which had been anticipated by taxpayers, based on the provisions of the FB 2022. Unlike in
previous years, the FA 2023 was not signed into law and did not become effective in the first
quarter of 2023.
KEY LAWS AMENDED BY THE FA 2023
The Finance Act 2023 amends the Capital Gains Act 2004 (as amended) (“CGTA”), Companies
Income Tax Act 2004 (as amended) (“CITA”), Customs, Excise Tariff, Etc. (Consolidation) Act
2004 (as amended) (“CETA”), Personal Income Tax Act 2004 (as amended) (“PITA”), Petroleum
Profit Tax Act 2004 (as amended) (“PPTA”), Stamp Duties Act 2004 (as amended) (“SDA”),
Value Added Tax Act 2004 (as amended) (“VAT”), Corrupt Practices and Other Related
Offences Act (as amended) (“CPORO Act”), Public Procurement Act (“PRA”), Tertiary
Education Trust Fund (Establishment Etc.) Act 2010 (as amended) (“TET Fund Act”) and the
Ministry of Finance (Incorporated) Act 2004 (as amended) (“MOF Act”).
KEY CHANGES INTRODUCED BY THE FA 2023
The following is a summary of some of the amendments to the major tax laws:
Capital Gains Tax
• Gains of the disposal of digital assets are now subject to tax: Digital assets are now
considered to be chargeable assets under the CGTA, thereby making them liable to
capital gains tax upon disposal. The term “digital asset” is, however, not defined.
Considering the broad spectrum of digital assets, the absence of a definition for the
term “digital assets” creates uncertainty for taxpayers. It will be interesting to see how
the tax authorities will implement these provisions, particularly in relation to digital
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assets such as cryptocurrencies which the CBN prohibited its regulated financial
institutions from either dealing in them or facilitating its trade or exchange.
• Extended loss relief period for capital gains: Making it clear that, in computing capital
gains tax (“CGT”), losses incurred on the disposal of a chargeable asset will now be
deductible from gains accruing to a person disposing of the asset or against any other
chargeable gain from the disposal of other assets from the same class. In addition,
where the aggregate capital losses exceed the aggregate capital profit, taxpayers will
now be able to carry forward such losses for a period of up to five years commencing
from the immediately succeeding year in which the loss was incurred.
• Roll-over relief for stocks and shares: The FA 2023 provides that, in order for the roll-
over relief to be applicable to stocks and shares, the proceeds from the qualifying
disposals must be reinvested in the acquisition of shares either within the same
company or any other Nigerian company. This reinvestment is to be done within the
same year of assessment.
Companies Income Tax
• New compliance obligation for shipping and air transport operators: Any company
engaged in shipping and air transport business is now required to submit a certified
copy of its detailed gross revenue statement covering its Nigerian operations and
showing the full amount earned over the relevant period. This requirement is only
applicable when the company fails to provide a separate financial statement for its
Nigerian operations. In addition, regulators such as the Nigerian Shippers Council and
the Nigerian Civil Aviation Authority are required to mandate all non-Nigerian
companies engaged in the business of shipping or air transport to provide evidence of
income tax filing for the preceding year as well as a tax clearance certificate before
issuing any approvals or permits.
• Withdrawal of Incentives: Taxpayers can no longer claim the additional investment
allowance of 10% on qualifying expenditure incurred on plant and equipment. This does
not affect qualifying assets acquired on or before 28 May 2023. The Rural Investment
Allowance which allowed companies that build and develop public infrastructures such
as roads, electricity, or water, some allowance to be deducted from their profits, has
been repealed. Companies already enjoying the incentive before 28 May 2023 are
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allowed to continue claiming the allowance until it is fully utilised. Also, the 25% tax
exemption available to hotels in connection with income that they earn from trading
convertible currencies provided by tourists has been repealed with the qualification that
Companies already enjoying the incentive before 28 May 2023 are allowed to continue
claiming the allowance until it is fully utilised.
• FA 2023 has restated that capital allowance on qualifying assets is limited to sixty-six
two-thirds percent of the assessable profits of a company. This limitation does not
apply to companies engaged in upstream and midstream gas operations, agro-allied
industry or in the trade or business of manufacturing.
Value Added Tax
• VAT GAAR rule: The FA 2023 empowers the Federal Inland Revenue Service (“FIRS”) to
disregard a disposition or adjust controlled transactions that it considers there has
actually been no disposition or to be artificial and fictitious for VAT purposes.
Disposition includes trust, grant, covenant, scheme, agreement or arrangement, and
related parties’ transactions.
• Elimination of double VAT on goods purchased from a non-resident supplier: The
FA 2023 now provides that where goods are purchased from a non-resident supplier
(“NRS”) through an online or digital platform, and such an NRS has remitted the
associated VAT for the transaction to the FIRS, when the goods are physically imported
in Nigeria, the Nigerian Customs Service will not be required to collect VAT on those
same goods, provided that the importer/recipient of the goods in Nigeria shows proof
that VAT has been remitted in respect of those goods by the NRS.
• VAT Collection Agents: Section 14(3) of the VAT Act has been amended to allow the
FIRS to appoint persons to withhold or collect VAT. Persons appointed by the FIRS are
to remit the applicable tax in the currency withheld on or before the 14th day of the
following month.
• New definition of “building”: A new definition of “building” for VAT purposes has
been included and it excludes any fixtures or structures that can be easily removed from
land such as radio and television masts, transmission lines, cell towers, mobile homes,
caravans and trailers. This implies that such assets are not eligible for the VAT
exemption on buildings.
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Petroleum Profits Tax
• Recognition of the Nigerian Upstream Petroleum Regulatory Commission
(“NUPRC”): The PPTA has now been amended to recognise the NUPRC as the regulator
of the Nigerian upstream petroleum sector.
• Tax-deductible contributions: Monies contributed to a NUPRC-approved fund,
scheme, or arrangement for the purpose of decommissioning and abandonment have
now been included as part of the allowable deductions under the PPTA. This is,
however, subject to the production of the statement of account of the decommissioning
and abandonment fund. Any surplus or residue monies after decommissioning and
abandonment of the field are subject to tax under the PPTA.
• Increased Fines: The FA 2023 also amends the PPTA by updating the penalty sections.
There has been a general increase in the amount payable as fines under the PPTA. For
instance, the fine payable has been increased from NGN10,000 to NGN10 million for
non-compliance with the provisions of the Act and from NGN2,000 to NGN2 million for
each day that the default continues. In addition, the Minister is also empowered to
prescribe any other financial penalties. The FA 2023 imposes an administrative penalty
of NGN15 million and 1% of the amount of tax undercharged, on the filing of incorrect
returns.
Personal Income Tax
• Allowable deduction of life insurance premiums: Amounts paid as premium by an
individual during the preceding year of assessment in respect of his/her own life or the
life of a spouse, or contract for a deferred annuity are now tax deductible provided that
any portion of a deferred annuity withdrawn within 5 years of paying the premium will be
taxed at the point of withdrawal.
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Tertiary Education Trust Fund (Establishment Etc.) Act
• Increased tax rate: One of the most significant changes under the TET Fund Act is the
increase in the rate of education tax from 2.5% to 3%. This is significant as it effectively
increases the overall tax rate for companies in Nigeria.
Customs and Excise Duties
• Introduction of import levy: The CETA has been amended to provide for an import
levy of 0.5% chargeable on all eligible goods imported into Nigeria from countries
outside Africa. This is to finance Nigeria’s capital contributions, subscriptions, and other
financial obligations to various multilateral institutions such as the African Union, African
Development Bank, the African Export-Import Bank, the ECOWAS Bank for Investment
and Development, and the Islamic Development Bank.
• Excise duty now payable on all services: Excise duty will now apply to all services
provided in Nigeria at rates to be specified by the President in an Order. Pending when
the President issued the relevant Order, it is not clear yet the nature of services on which
the duty will be imposed. You may recall that the Finance Act 2020 had subjected
telecommunication services to excise duties, and this has now been extended by the FA
2023 to all services.
• The CETA was also amended to clarify the responsibility and powers of the Minister of
Finance (the “Minister”) to review customs and excise tariffs through the Tariff Review
Board set up by the Minister.
Stamp Duties
• Electronic Money Transfer Levy: The sharing formula for revenue generated from the
Electronic Money Transfer Levy has been amended. 15% is to go to the Federal
Government, 50% to the state governments, and 35% to the local governments. The
Minister recently released the Electronic Money Transfer Levy Regulations, 2022, to
provide an effective framework for the effective and efficient administration of the levy.
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Corrupt Practices and Other Related Offences Act
• To ensure that the necessary approvals are obtained before public officers sign
contracts, the FA 2023 has amended the provisions of section 22(4) of the CPORO Act by
making it an offence for any public officer, while acting in an official capacity, to award
or sign any contract without budgetary provision, administrative approvals, and a
procurement plan. Upon conviction, such an official is to be imprisoned for a term of
three (3) years or liable to a fine of NGN10 million. A corresponding amendment has
also been made to section 16(1)(b) of the PPA which now requires an approved
procurement plan, subject to complying with the prescribed threshold before any
procurement proceedings are formalised by the procuring entity and relevant
authorisations obtained.
Ministry of Finance (Incorporated) Act
• The FA 2023 amends the MOF Act by including new sub-sections 3, 4, and 5 under
section 3 of the Act. Now, the President is empowered to appoint persons to the
Governing Council, Executive Board, and Management Team (as required), of the
Ministry of Finance (“MOF”) on the recommendation of the Minister. The MOF is to also
develop, amend and revoke or supplement appropriate regulations, codes, internal
guidelines, and procedures consistent with the MOF Act in furtherance of the MOF’s
objectives. In addition, the Minister is to be consulted prior to the adoption of any
regulations, internal guidelines, and procedures.
CONCLUSION
The primary purpose of a Finance Act is to implement current fiscal policies. Considering the
delay in passing the FA 2023, and the recent change in government, further changes or
amendments may still be made to existing tax laws. We will continue to follow new
developments as they unfold and will, in our further publications, analyse their implications
for taxpayers.
This update has been provided by Lolade Ososami, Joseph Eimunjeze, and Oluwatobi Akintayo of the Tax team at Udo
Udoma & Belo-Osagie. For more information about our Tax practice group offerings, please visit our website at
www.uubo.org or email us at uubo@uubo.org.
DISCLAIMER: This article is only intended for information purposes and shall not be construed as legal advice on any subject matter
in any circumstances. It does not and shall not be construed as creating any relationship, including a client/attorney relationship,
between readers and our firm or any author or serve as legal advice. The opinions expressed in this publication are the opinions of
the individual authors and may not reflect the views of the firm or any individual attorney. You should contact your attorney for
advice on any particular issue or problem.
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